China United Airlines converted into budget carrier

China Eastern Airlines has converted fully-owned subsidiary China United Airlines into a budget airline, it said yesterday, making it the first of the mainland's three big, state-owned aviation players to enter the low-cost-carrier (LCC) market.

China Eastern said in a brief post on its Sina Weibo microblog that China United would strive to be the mainland's biggest budget operator.

"China Eastern is the first of the 'Big Three' to announce an LCC subsidiary, although China Southern is studying converting Chongqing Airlines while Air China has been doing its own studies," said Will Horton, senior analyst for North Asia at the Centre for Aviation, an industry data provider.

Andrew Orchard, analyst at CIMB Securities, said the mainland's LCC market had been "rather restricted" in the past, with Shanghai-based Spring Airlines, established in 2004, the only significant player. "It is still a relatively new industry within China, there's not a lot of competition in that space," he said.

The Civil Aviation Administration of China said in November that it would relax controls on the LCC market and encourage full-service carriers to establish low-fare subsidiaries.

"We are seeing a lot of liberalisation in the Chinese aviation industry," Orchard said. "[The China United conversion] is a reinforcement of the view that the government is encouraging competition."